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Earnings Preview: Schlumberger - Analyst Blog

Leading oilfield services company, Schlumberger
Limited ( SLB ) is set to report
its first-quarter 2013 results on Apr 19, 2013. Let's see how
things are shaping up prior to the announcement.

In the last quarter, the company's earnings of $1.08 per share
decreased 1.8% from $1.10 per share earned in the year-ago quarter.
The quarterly results were adversely impacted by the seasonal
slowdown, contract delays and mobilization, along with project
start-up costs. However the results were in line with the Zacks
Consensus Estimate.

Growth Factors this Past Quarter

In the first quarter, Schlumberger witnessed lower-than-expected
U.S. drilling activity resulting in an uncertain outlook for the
North America land market. Although Schlumberger's asset deployment
recovered from a holiday slowdown and the costs of its key
hydraulic fracturing constituents (like guar) were lower, it
continues to expect negative pricing pressure in many product lines
for the first quarter. Finally, volatile natural gas prices,
arising out of hydraulic fracturing technique, have also affected
the demand for gas-directed activity in North America.

However owing to Schlumberger's far-reaching international
presence and deep-water exploration, it faces less North America
exposure than rivals like Baker Hughes Inc. ( BHI ).

In the international arena, although Schlumberger experienced a
choppy fourth quarter 2012 due to transitory issues, activity
levels are expected to enjoy growth throughout 2013. The company
also aims at double-digit earnings growth for this year, provided
North America land activity and pricing levels are up to its
expectations. The earnings assumption also takes into account a
resolution in Venezuela, where the company registered a major
slowdown in payment collection last quarter.

The company is aiming for continued international improvement
underpinned by Saudi Arabia, Iraq, Russia, China and Africa for the
coming quarters. In the Gulf of Mexico, however, the activity level
remains temporarily affected by the substitution of subsea
connector bolts on some rigs in the region.

Earnings Whispers?

Our proven model does not conclusively show that Schlumberger is
likely to beat earnings estimates this quarter. This is because a
stock needs to have both a positive earnings Expected Surprise
Prediction ESP (Read: Zacks Earnings ESP: A Better Method) and a
Zacks Rank #1, #2 or #3 for this to happen. This is not the case
here as you will see below.

Zacks ESP: The Expected Surprise Prediction or ESP, which
represents the difference between the Most Accurate estimate and
the Zacks Consensus Estimate, is 0.00%. This is because both the
Most Accurate Estimate and Zacks Consensus Estimate currently
stands at 99 cents.

Zacks Rank #3 (Hold): Schlumberger's Zacks Rank #3 (Hold) lowers
the predictive power of ESP because the Zacks Rank #3 when combined
with an ESP of 0.00% indicates the possibility of in line results.
We caution against stocks with Zacks Ranks #4 and #5 (Sell rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies you may want to consider as our model
shows they have the right combination of elements to post an
earnings beat this quarter.

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